Target's decision to remove CEO rattles investors

SummaryTarget Corp's decision to oust Gregg Steinhafel as chairman and chief executive some five months after a massive data breach has triggered concerns the No. 3 U.S. retailer might have even more bad news for investors.

Target Corp's decision to oust Gregg Steinhafel as chairman and chief executive some five months after a massive data breach has triggered concerns the No. 3 U.S. retailer might have even more bad news for investors.

The board of directors removed Steinhafel on Monday, saying it wants new leadership to help restore consumer confidence in the No. 2 U.S. discount retailer.

"You got to wonder what prompted it now. What else will come to light," said Dieter Waizenegger, executive director, of CtW Investment Group, which advises union pension funds with about $250 billion under management, including those owning about 3.3 million Target shares.

The massive data breach and last year's misguided push into Canada have already hurt profit and revenue. Analysts and shareholders expect to hear more of the same when the company reports results May 21 for the quarter ended May 3 and worry that the company could disclose other problems as well.

"We would hazard a guess that first-quarter sales continued to be hurt by the data breach aftermath and that the Canada expansion is still in trouble," Carol Levenson, an analyst with bond researcher Gimme Credit, said in a report.

Target's shares fell 3.5 percent to close at $59.87 on Monday, a sign investors were not convinced a change at the top alone would solve the problems facing the company. In the year up to Friday's close, the stock fell 13.8 percent, while the S&P 500 rose 15.6 percent.

A 35-year veteran of the company, Steinhafel, 59, had been CEO since 2008. Just two years ago, the company was celebrated as the "cheap chic" alternative to No. 1 Wal-Mart Stores Inc .

The Minneapolis-based company named Chief Financial Officer John Mulligan as interim chief executive, and Roxanne Austin, a member of the board of directors, as interim non-executive chairwoman of the board.

The company said it hired recruiting firm Korn Ferry to help the board find a new CEO, indicating it is open to finding an outsider to guide it out of its current malaise, rather than pulling its next CEO from its executive ranks as it did when it promoted Steinhafel from president.

FBR Capital Markets analyst Daniel Ives said he believed Steinhafel, who will stay on in an advisory role for a while, is the first CEO to be removed following a major data breach.

The timing of the sudden change in leadership, given all the problems that Target is facing, is hardly ideal,